The IMAX Solution

Article excerpt

Byline: Daniel Gross

A 'giant' way to save movies.

Americans are losing the taste for going to the movies. According to the Motion Picture Association of America, movie admissions in the U.S. and Canada dropped 18 percent between 2002 and 2011. Domestic admissions per capita were 3.9 in 2011, down from 5.2 in 2002.

Flat is the new up. But not at IMAX, which builds giant-screen movie systems and remasters films to be shown in those venues. Just before the Oscars, IMAX reported that its 2012 revenues had increased a smart 20 percent to $284.3 million, and that it had installed 125 new theater systems last year. "The network has grown around 25 percent for the last four years, compounded," says Richard Gelfond, a former lawyer and Drexel Burnham banker who has been running the firm since 1996. IMAX's stock has quadrupled in the past five years, giving it a value of $1.7 billion.

Why? IMAX is playing a different game than some of its struggling counterparts. It is essentially a technology company. IMAX doesn't produce its own films, nor does it build or operate multiplexes. Rather, it markets a film-going experience--a huge screen, dramatic pictures, fantastic sound, and expensive tickets. Add in 3-D, and IMAX turns a trip to the movies into an immersive, tactile, enveloping event that can't easily be replicated on smaller devices outside the theater. And while Regal Entertainment and AMC, the two largest U.S.-based theater owners, have no operations outside America, IMAX has successfully persuaded the burgeoning ranks of foreign theater developers to include it in their spanking-new multiplexes.

That ability to get into the foreign market matters--a lot. Middle-class Americans may be falling out of love with movies. But middle-class Chinese, Indians, and Russians are just starting to pick up the habit. Today about two thirds of Hollywood's box office comes from overseas. The number of screens in China has risen fivefold over the past several years.

Boston Consulting Group refers to the discretionary spending of emerging-market middle-class consumers as the "$10 trillion prize." "We had a minimal international presence seven years ago," says Gelfond, a youthful 58, with wavy, brown hair and a residual Long Island accent. …